Convertibles bounce around; selling hits Nabors, Transocean, AMD; Cubist up on earnings; Wyeth up

By Rebecca Melvin

New York, Jan. 23 - Several convertible bond issues that were active all week succumbed to selling pressure Friday as stock markets ended mixed after an early sell-off on earnings worries.

Transocean Inc. and Nabors Industries Inc. convertibles bounced around in good two-way flow but ended lower as players sought to pocket some profits.

Advanced Micro Devices Inc. was also hit by selling as its shares swung wildly a day after the Sunnyvale, Calif.-based chipmaker posted fourth-quarter earnings that indicated 2009 would remain challenging.

On the upside, Cubist Pharmaceuticals Inc. convertibles gained about a point dollar neutral after the Lexington, Mass.-based biopharmaceutical company reported better-than-expected results due to improving sales.

Wyeth's floating-rate convertibles were active and up in line with shares after news reports that Pfizer Inc., the world's largest drug company, has been in talks to acquire the Madison, N.J.-based pharmaceutical company.

Things were bouncing around, but the stabilization of the stock market helped settle things, a West Coast-based sellsider said. "We started out looking at things a lot lower."

Issuer buybacks slow, primary eyed

Contrary to the "welcome event" that the buybacks were in the autumn when the market fell, now the market has basically moved on and it's less attractive for issuers, a syndicate source said.

Some issuer buybacks continue, but at a slower pace.

The primary market remained quiet but was seen moving in the right direction, however.

"We should start to see some issuance," a New York-based syndicate source said.

"We're going in the right direction and we're getting closer and closer to deals. It will be soon, maybe even in the next month," another syndicate source said.

There may not be the appetite for the arb play that the market saw last year, however, and deals are going to have to be marketed more for outrights, with more emphasis on credit ratings and yield, they said.

"People are cautious, and it's as if everyone wants to be a good caretaker of the market and not issue the first deal and have it be a total flop. They don't want to sneak through the window and have it slam shut. They want it to work out for both the issuer and the investor ... to find the best balance," the syndicate source said.

Selling hits Transocean, Nabors

Sellers of Transocean and Nabors emerged Friday to pocket some profits from the market's highly liquid convertible names. But it was "kind of trading back and forth. There was two-sided flow in the names, which have been active all week," a West Coast-based sellsider said.

Transocean's 1.625% series A convertibles due 2037 ended the day at about 89, after trading as low as 88.3 Friday, compared to 92 on Thursday.

Shares of the Houston-based offshore drilling services company reversed early losses to close up $2.67, or 5.4%, to $52.22.

The Transocean 1.5% series B convertibles due 2037 ended the session at 84, recovering from a low of 82.875 but down compared 86.5 on Thursday.

The Transocean 1.5% convertibles due 2037 series C settled at 80.25 after falling to as low as 77.

Nabors Industries' 0.94% convertibles due May 2011 ended at 82, compared to 88 on Thursday.

Shares of the Bermuda-based land drilling services company swung higher by 8% after starting the day in negative territory. The shares settled out at $11.68.

"They were reasonably active and have been liquid all week. Sellers were just showing for some profit," a sellsider said.

AMD for sale

Advanced Micro Devices' 5.75% convertibles due 2012 closed at 29.75 Friday after at least one earlier trade at 31, according to a New York-based sellside desk analyst. NASD Trace reported trades as high as 31.476.

AMD's 6% convertibles due 2015 closed at 27 on Friday, compared to an earlier trade of 28.

AMD shares ended up 5 cents, or 2.5%, at $2.07 after the chip giant reported a narrower fourth-quarter loss of $1.42 billion, or $2.34 a share, compared with a loss of $1.77 billion, or $3.06 a share, for the year-earlier period. Revenue was $1.16 billion, down from $1.74 billion last year. Adjusted net loss was $418 million.

Analysts had expected the company to post an adjusted loss of 54 cents a share on revenue of $1.23 billion.

The chipmakers, including Intel, have been blindsided by greater-than-expected deterioration of global PC demand. And the outlook is uncertain.

AMD was "pretty active for sale," a sellsider said.

Cubist up on good earnings

Cubist Pharmaceuticals' 2.25% convertibles due 2013 were up a point dollar, a sellsider said, settling at 89.85 versus a share price of $22.12.

Net income for the fourth quarter was $123 million, or $1.82 per diluted share, compared to $8 million, or $0.14 per diluted share, for the year-earlier quarter.

Included in fourth-quarter results is a tax benefit related to a reversal of Cubist's valuation allowance for deferred tax assets, which resulted in a benefit to tax expense of $127.8 million.

Fourth-quarter revenue rose 53% to $131.2 million, from $85.6 million in the fourth quarter of 2007. This increase was attributable primarily to Cubist's net sales of its Cubicin antibiotic in the United States, which increased 43% to $120.1 million in the fourth quarter from $83.9 million in the fourth quarter of 2007.

Wyeth lifts over par

Wyeth's 0.97% convertibles due 2024 traded a bit over par on Friday, up from 98.5 on Thursday. Its shares climbed $4.91, or nearly 13%, to $43.74.

Citing unnamed sources, the Wall Street Journal reported Friday that Pfizer has been in talks for months with Wyeth, and that they are negotiating a deal worth potentially more than $60 billion, although a deal isn't imminent.

Acquiring Madison, N.J.-based Wyeth could transform Pfizer from a pure pharmaceutical company into a more broadly diversified health care giant, given Wyeth's presence in biotech drugs, vaccines including the blockbuster pneumococcal vaccine Prevnar and consumer health products.

Pfizer's sales - while substantial as the world's top drugmaker - are dominated by its blockbuster Lipitor cholesterol drug. But Lipitor goes off patent and is expected to face generic competition by November 2011.

Mentioned in this article:

Advanced Micro Devices Inc. NYSE: AMD

Cubist Pharmaceuticals Inc. Nasdaq: CBST

Nabors Industries Ltd. NYSE: NBR

Transocean Inc. NYSE: RIG

Wyeth NYSE: WYE

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.